Lemonade Stand

(Or, How to Turn $37 Into Lemonade, And Then Into $50.)

Suppose you wanted to open a lemonade stand. Some internet searching reveals that the lemons, sugar, and water required to make lemonade add up to an overhead cost of about 37 cents per serving, in today's September 2020 dollars and price level. (Let's assume for simplicity's sake that you borrowed the table, the pitcher, the cups, etc.)

So, the cost to you is $0.37 per serving. You decide to sell your lemonade at a profit, so you choose a somewhat arbitrary price of $0.50, which earns you $0.13 per serving sold. 

Let us finally, and optimistically assume that you sell all the lemonade you make, and that you can make as much lemonade as you need to meet demand. You're clever enough to choose a good, legal location on a hot, sunny day, and so sell 100 servings per day whenever you decide to sell lemonade. You make a consistent profit of $13 per day. Not bad scratch for a little tike such as yourself.

Let's recap: Each day, you spend $37 at the grocery store for lemonade supplies, and you gain $50 from your customers. The difference between your cost and your revenue is $13, i.e. your profit.

Question: Where did this profit come from?

Yesterday, your customers were walking down the street with $50 in their collective pockets, and today, they are walking down the street with lemonade. You turned their $50 into lemonade; they turned your lemonade into $50.

Isn't it odd that you turned $37 into lemonade, but your customers turned $50 into lemonade? What happened? Did they over-pay?

No. While it's true that your customers could very well have gone to the grocery store and bought their own lemons and sugar, there are a few problems with doing so. First of all, it's inconvenient for them if they want lemonade now, relative to just buying a glass from you. Second, they'll likely end up with a surplus of lemons, sugar, lemonade, or all three; that is, they probably only want a glass of lemonade, not an entire lemonade stand. Third, when you went to the grocery store, you weren't thirsty; they were.

The revenue you make at your lemonade stand represents not only the cost of lemonade inputs, but also your customers' underlying sense of value, which is determined by convenience and thirst. 

When you turned $37 into lemonade, you weren't thirsty and you weren't inconvenienced. You ended up with a surplus of lemonade on purpose, so you could sell it. You also invested your surplus convenience and your surplus satiety into your lemonade stand.

At the end of the day, you turned $37 into lemonade, but then you turned convenience and thirst into $13 cash.

This process of turning other people's thirst into money is about as close to magic as the world gets, and it's one reason I've always been fascinated by economics.


An Idea For Improving Politics

Almost everyone agrees that the political situation in America today is dire. Very dire. Political polarization is at an all-time high, and neither of the major political parties seems equipped to reduce that polarization. The Republican Party has more or less traded in its old platform ideas for the sake of advancing a cult of personality, and not even a particularly attractive personality. (Seriously, have you ever heard anyone since before 2015 say that they want to be like Donald Trump or that they emulate him as a person?) Meanwhile, the Democratic Party is being held captive by an increasingly shrill and literally destructive mob of critical race theorists whose ultimate objective is to destroy, not racism, but capitalism. Both sides are becoming increasingly violent, where here "violent" means, "literally engaged in causing physical harm to members of the opposing political team."

It's scary out there, and there is very little hope for improvement. Granted, a vote for Joe Biden at least appears to be a vote for establishing the old status quo - not that that was a particularly attractive thing, but merely that it seems better than four years of a worsening political environment under Trump. That, of course, assumes that four years of the Biden-flavored status quo would improve the political environment at all. I'm hopeful that it will, but there's no guarantee, and a wide array of hypothetical scenarios in which things could get worse. 

If only someone had a good idea for improving America's political environment. Lucky you, faithful readers! I have given this issue a few moments of idle thought, and have unsurprisingly solved the whole puzzle over the course of a can of La Croix.

It came to me as I was reading a friend's Facebook status. He remarked that the federal US legislature had passed a particularly low number of bills this year: 158, compared to the usual 500 or so. His point was that the obstructionists in the legislature were preventing all the other well-intentioned legislators from doing their job, which is of course to create new laws and pass them.

The astute, libertarian reader will immediately note that my friend's assumption is that many of the problems we currently face as a country stem from there being too few laws. If the legislature could only pass more of them, more of our country's problems would be solved!

Not to give away the ending of this post too quickly here, but the astute, libertarian reader will have already guessed how this thing ends, anyway.

I thought to myself, ("Self," I thought), What if one of the underlying problems here is that we see the government's job as being "to create new laws and regulations, and to enforce those that already exist?" In such an environment, a "successful" politician will be the one that passes more new laws, and/or enforces the existing ones more stringently. Assuming all politicians have only the best of intentions (ha, ha), the most successful politician in a world like that will be the one that succeeds at creating and enforcing laws; over time, politicians will become more successful at doing so; ever-more laws will have to be created, and ever-more-stringent enforcement mechanisms will have to be devised to ensure the "success" of the political system, subject to its assumed purpose.

What if we instead defined the government's job to be something like, "to serve as the final arbiter of conflict?" In such an environment, a "successful" politician would be the one that most effectively arbitrates conflict. The goal of legislating would not be to simply create and enforce new laws, but to create laws that reduce conflict and eliminate conflicting laws. The goal of the executive would not be to merely enforce the law, but to reduce conflict with the law. The goal of the judiciary would be to literally arbitrate between two conflicted parties. The more conflict is reduced in such a system, the more "successful" politicians are deemed. 

That all sounds a bit idealistic, but I'm not really articulating a view about the mechanics of government. Rather, I'm articulating a view about how ordinary people can think about government, such that our political environment improves. 

Change the way we think about government, in other words, and we might just change our political system.

There is no room for cynics in this idea, though. Cynicism is a cancer that destroys everything it touches, and it's probably responsible for most of the terrible things you see out there, at least as far as politics goes. 

So, if you want to be hopeful, maybe it's time to try my idea on for size. How might your attitudes and opinions change if you thought of government as a conflict-resolution mechanism, rather than a law-enforcement mechanism?